A Comprehensive Guide to Secured Loans

The world of business continues to evolve, and the lending space is no exception. There is an increasing demand for secured loans which has brought about changes in many areas. New loan types, faster settlement, and a shift to alternative sources of funding are just the tip of the iceberg. We take an in-depth look at secured business loans and how they can be utilised to build a strong financial future.

What is a secured loan?

Secured loans are a popular and convenient financial solution where a form of collateral is used to obtain finance. Secured loans allow you to leverage existing assets to obtain funds which can help turn weaknesses into strengths and threats into opportunities. Whether you are looking to consolidate debt, acquire new equipment, or expand your business operations, a secured loan with Simply Funds can help elevate your business.

How do I apply for a secured loan?

It has never been easier to apply for a secured business loan. Simply Funds has created a fast application process that can be completed in minutes. As holders of an Australian Credit Licence, our expert team can effectively assess your financial situation and recommend a loan product which is most suitable for your needs. Once approved, a lending specialist will prepare the loan documents for signing and the funds made available shortly after.

What information do I need to apply for a loan?

There is a growing demand for alternative financing with major lending institutions becoming increasingly risk averse. Mainstream lenders such as banks require an excellent credit history and a substantial amount of financial statements. As a result, the approval process can be both lengthy and strenuous.

This is not the case with Simply Funds as many of our loan products do not require substantial financial records such as tax returns, bank statements, expenditure reports, sales records, and cash flow projections. Depending on the type of loan you are applying for, basic information with respect to your assets and liabilities will often suffice. Desktop real estate valuations help save time and when necessary, we can make the funds available to you within 48 hours.

What is the difference between unsecured and secured loans?

The main difference between unsecured and secured loans is that the latter requires the use of collateral to obtain finance. A lien gives the lender a claim to the asset being used to secure the loan until the debt is paid off. If the borrower fails to make repayments as outlined in the terms of the loan and subsequently defaults, the lender has the right to sell the asset to recover any money owed.

What are the different types of secured loans?

There are many different types of secured loans. Home loans are the most recognisable with secured personal loans such as car loans also extremely popular. In relation to secured business loans, the most common are:

  • Caveat Loans: Short-term where finance is secured using a piece of real estate. The caveat gives the lender a financial interest in the property but not the right to take ownership if repayments are not made. Instead, it prevents the borrower from taking certain actions such as selling or transferring the property.
  • Second Mortgage Loans:Allow you to use any equity in a personal property which has an existing mortgage. Key features include larger loan amounts and lower interest rates than other loan products.
  • Property Development Loans:Source of financing for the completion of commercial and residential projects. Common features include interest capitalisation and staged payments.
  • Secured Business Loans:Borrowers can utilise alternative assets to real estate as security including inventory and accounts receivable.

What are the benefits of secured loans?

The use of an asset as security significantly decreases the risk associated with loan for the lender. This creates a more comfortable lending environment that borrowers can benefit from. Some of the advantages associated with secured business loans include:

  1. Larger Loan Amount: As the lender has collateral available in the event of a default, the risk of lending is diminished allowing for significantly larger loan amounts. The amount that can be borrowed will depend on the value of the asset and the equity available in it.
  2. Lower Interest Rates: Like above, lenders can offer significantly lower interest rates with secured loans when compared to unsecured loans such as credit cards, personal loans, and other lending products. This is critical as it keeps the cost of the loan to a minimum.
  3. Easier To Obtain Finance: The presence of a secured asset makes the approval process both faster and easier. This is particularly the case for established businesses. Simply Funds have start up business loans which are suitable for new ventures and businesses in their infancy.
  4. Loan Terms: Flexible repayment terms mean that borrowers can benefit from fees and cost savings. Lenders are also more likely to allow loan extensions with secured loans.
  5. Improve Credit Rating: Repaying a personal secured loan on time is an effective way to enhance your credit rating. This will make it easier to borrow money in the future with a wider range of loan products available to those who have a good credit rating.

What can be used as security for a secured loan?

There is a wide range of assets that can be used as collateral for a secured loan including real estate, other tangible assets, inventory, and business invoices where applicable.

Real Estate: Is the most common form of security and the one which provides the best prospects of getting a loan approval. Residential, commercial, and vacant land are all acceptable. The type of property and its location will impact the maximum loan-to-value ratio (LVR) allowed.

Other Assets: Motor vehicles, equipment, machinery, and savings which you may wish to preserve for other reasons are among other acceptable forms of security. Factors which will be considered include the value, condition, and liquidity of the asset. Assets such as motor vehicles which can be easily liquidated are more likely to obtain their full value while specialist machinery may not attract its full value due to lower levels of liquidity.

Inventory: It is not uncommon for businesses to have a substantial amount of stock and high value products that may be used to obtain finance. Much of this is liquid and stock valuation can be achieved in a timely manner.

Invoices: Unpaid invoices are one of the main reasons for businesses facing financial difficulties. Accounts receivable is recognised as an asset on the balance sheet and can be used as collateral for specific types of small business loans. Financial statements will need to be provided.

Secured loans with Simply Funds

At Simply Funds we pride ourselves on being able to help individuals and businesses achieve their goals. Our flexible lending criteria has seen us help countless people that have been turned down by major lending institutions such as banks. Our online application process is completely hassle-free, and no credit checks are conducted when providing pre-approvals. Submit an online application today to find out if you are eligible for a secure loan.

Simply Funds latest articles

Check if you qualify for a Simply Funds business loan

Clear your ATO debt with Simply Funds

We’ll assess your application fast and get you an answer (and the funds you need) quickly.
Simply select the amount you're looking to borrow, click on the button below and fill out the
form. Our friendly team will respond to your enquiry as soon as possible.

How much do you want to borrow?

A Bizcap provides both Unsecured and Secured loans to Small Business Owners. When assessing a loan application Bizcap generally doesn't take into consideration if a prospective customer has specific assets to provide as security. However:
(a) if the loan amount is above $30,000 (or any other figure which Bizcap determines from time to time), Bizcap will, under the loan agreement take a charge. For a corporate borrower and any corporate guarantor, the charge is over all of that entity's present and after-acquired property (that is. the security is not over specific assets but any and all assets which the entity may have). For a sole trader borrower and any individual guarantor, the charge is over its current and future real property; and
(b) in certain instances, for example, where the loan relative to the cash flow of the borrower is of a size that warrants the provision of security over specific assets. Bizcap may require specific security to be granted over those assets. Bizcop may register its security interest(s) under relevant legislation, including the Personal Properties Securities Register and the register held under the Real Property Act 1900 (NSW) or Its equivalent.
I n addition. Bizcap may take personal guarantees from directors of corporate borrowers, directors of corporate guarantors and certain individuals. No registrations are made in respect of guarantees.